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Development Charges For Non-Landed Homes Fell 5.5%

The development charge (DC) rates for non-landed residential properties fell by 5.5 percent on average, following a slowdown in residential land activity.

The drop in DC rates for non-landed homes was the first since March 2016, when DC rates declined by 0.9 percent and was the strongest fall since March 2009, when DC rates plunged 15.3 percent, noted Cushman & Wakefield’s senior director and head of research, Christine Li.

She noted that the decline came as no surprise given that developers have taken a cautious stance in acquiring residential collective sales and government land sales sites since the government implemented new property curbs in July.

Get more details on the property market outlook for 2019 here

“Since the fresh property cooling measures were implemented in July 2018, developers’ perceived risk-reward ratio on residential deals has shifted, resulting in waning investment appetite,” said Tricia Song, head of research for Singapore at Colliers International.

In fact, a JLL study showed that not a single residential collective sale was concluded during the six months ending-February 2019, “while residential (ex-EC) government land sale sites (GLS) for which tender closed during this period generally attracted fewer bids (up to seven) compared to those closed in the six months prior (they attracted up to 10 bids)”.

Moreover, bids for residential sites have also been more cautious, said Tay Huey Ying, head of research and consultancy at JLL Singapore.

The residential site at Kampong Java Road, for instance, attracted a top bid of $418.38 million ($1,192 psf ppr) during the close of its tender in January, while several collective sale sites that were sold before the July cooling measures registered higher unit land prices.

These include Makeway View, which went for $1,626 psf ppr in March 2018, Dunearn Gardens at $1,914 in April 2018 and Chancery Court at $1,610 in May 2018.

“With the reduction of DC rates, developers will get a temporary reprieve if they were to consider replenishing their landbanks over the next six months. However, this in our view might not be significant enough to offset the higher acquisition costs faced by developers as a result of the latest round of cooling measures,” said Li.

“The fact that the average unit sizes are also increased from 70 sq m to 85 sq m for homes outside central area will also cripple developer’s ability to increase selling prices over the medium term.”

As such, residential en bloc hopefuls may have to lower their asking prices to attract serious buyers in today’s increasingly challenging residential market, she added.

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